What is ABC.L's Intrinsic value?

Abcam PLC (ABC.L) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Abcam PLC's estimated intrinsic value ranges from $75.07 to $384.63 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $383.33 -68.7%
Discounted Cash Flow (5Y) $384.63 -68.6%
Dividend Discount Model (Multi-Stage) $314.90 -74.3%
Dividend Discount Model (Stable) $128.86 -89.5%
Earnings Power Value $75.07 -93.9%

Is Abcam PLC (ABC.L) undervalued or overvalued?

With the current market price at $1226.00, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Abcam PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.38 0.48
Cost of equity 6.3% 8.3%
Cost of debt 5.2% 5.2%
Tax rate 18.9% 26.4%
Debt/Equity ratio 0.08 0.08
After-tax WACC 6.1% 8.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $463 (FY12-2021) to $479 (FY12-2031)
  • Net profit margin expansion from 4% to 10%
  • Capital expenditures maintained at approximately 17% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $385 $970M 89.8%
10-Year Growth $383 $967M 77.0%
5-Year EBITDA $469 $1,156M 91.4%
10-Year EBITDA $454 $1,123M 80.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.3%
  • Long-term growth rate: 4.0%
  • Fair value: $314.90 (-74.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.3% (Low) to 6.3% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $41 to $217
  • Selected fair value: $128.86 (-89.5% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $20M
Discount Rate (WACC) 8.0% - 6.1%
Enterprise Value $248M - $324M
Net Debt $120M
Equity Value $128M - $203M
Outstanding Shares 2M
Fair Value $58 - $92
Selected Fair Value $75.07

Key Financial Metrics

Metric Value
Market Capitalization $2708M
Enterprise Value $2828M
Trailing P/E 398.20
Forward P/E 166.07
Trailing EV/EBITDA 13.05
Current Dividend Yield 24.81%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.08

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $115.00
Discounted Cash Flow (5Y) 25% $96.16
Dividend Discount Model (Multi-Stage) 20% $62.98
Dividend Discount Model (Stable) 15% $19.33
Earnings Power Value 10% $7.51
Weighted Average 100% $300.97

Investment Conclusion

Based on our comprehensive valuation analysis, Abcam PLC's weighted average intrinsic value is $300.97, which is approximately 75.5% below the current market price of $1226.00.

Key investment considerations:

  • Strong projected earnings growth (4% to 10% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)

Given these factors, we believe Abcam PLC is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.